Indian e-commerce has entered a reality phase: Mohandas Pai

Tech investor Mohandas Pai released a statement on Thursday, that stated India’s e-commerce sector has entered a reality check phase from a period of exuberance. It says players who are focusing on cost cutting and business viability as investors seek performance.

Pai says players who are focusing on cost cutting and business viability as investors seek performance.

“Now, the funds have become very costly. Now, they (investors) are demanding performance. Capital is also becoming scarce driven by interest rates in the US and potential meltdown in demand in China. Europe is not growing and Japan is not doing well and there is fear. That’s why venture capital inflow is drying up. They (investors) have become very selective. People are now beginning to ask questions as to when e-commerce business will be viable and when they will create a sustainable business and value for the money they have put in, that’s good news,” Mohandas Pai was quoted by PTI as saying.

It is a common notion among many e-commerce players that fat discounts will enable them to increase their sale and hence more revenue will be generated.

“Now, investors are demanding performance. Some sanity is coming (in the e-commerce space). E-commerce players should build business based upon efficiency and not upon steep discounting. Discounting can be there to the extent of savings they have compared to a conventional store. They are getting cautious and they are cutting costs, and that’s good news,” Co-founder, Aarin Capital, Ranjan Pai was quoted by PTI as saying.

When asked, whether some of the leading Indian e-commerce players are overvalued, Ranjan Pai was quoted by PTI as saying, “Whether they are overvalued or not depends on who is willing to pay money for that valuation. If they are raising capital, if somebody is paying money, then it’s fairly valued. It’s very difficult to make comments. Some funds write it down based on their model.”